M&A Issues: Reps, Warranties, Indemnities (Part I)

Imagine that you’ve bought a business that runs a web app, and a few months later you discover that a key piece of code was written not by an employee, but by an independent contractor, and that the contractor had no written agreement for that work (which under Canadian law means you don’t own the work), and wasn’t paid for it. And imagine that the contractor left after an argument with the seller, and is still so annoyed that she now wants to be paid extra for that work.

Or that you discover that the company had been withholding income tax from its employees but not remitting that money to the government. Or that it had been collecting HST on sales of products, but not remitting that. And the money is not in the bank account.